The Director General of the International Monetary Fund, Kristalina Georgieva, warned on Wednesday that the global economy faces increasing threats due to the continued rise in energy prices, record levels of public debt, and risks associated with the investment boom in artificial intelligence, calling on governments to take preventive financial and monetary measures.
Georgieva said, in a speech in anticipation of the annual meetings of the International Monetary Fund and the World Bank scheduled to be held next week in Bangkok, that the global economy is being pulled in two contradictory directions, due to a negative shock in energy supplies resulting from conflicts in the Middle East, versus a positive shock in demand led by artificial intelligence, but it also contributes to increasing inflation, according to Reuters.
She added that “the combined impact of these two forces is very different around the world,” noting that the artificial intelligence boom extends beyond many countries.
Georgieva said that the IMF's new growth forecasts, which will be issued during the Bangkok meetings, will show that the biggest cuts in growth forecasts will affect war-weary economies.
Georgieva did not clarify, in her prepared statements, whether the latest version of the “World Economic Outlook” report would include a change in global growth expectations for 2026, which amount to 3.0 percent, according to expectations last July, a pace described as weak.
These forecasts assumed a recovery in growth to 3.4 percent during the year 2027, on the basis that the Strait of Hormuz would begin to reopen in mid-July and return to pre-war conditions by March 2027. They also assumed that the average price of oil would reach $89 per barrel in 2026, and $78 in 2027.
Georgieva said that oil prices are still at around $100 per barrel, while the affected refining capacity has led to another $100 being added to the “refining spread” margins for each barrel of the main products. Including diesel.
She added that the winter heating season will boost demand, at a time when natural gas supplies are still restricted due to threats facing liquefied natural gas shipments through the Strait of Hormuz.
She said: “Even if the war ends soon, the problem of high energy prices is likely to continue for some time,” noting that Brent crude futures expect oil prices to remain high until 2027.
She stressed that rising energy prices push inflation, basic interest rates, and benchmark bond yields upward, noting that 10-year sovereign bond yields in the United States, Germany, and Japan have currently reached their highest levels since 2007, 2009, and 1996, respectively, and are still on an upward trend.
Debt burdens increase
Georgieva said that the high public debt burden, which saps growth and increases inflationary pressures, represents an additional source of concern that the 191 member states of the IMF will discuss next week.
The IMF says public debt is at its highest level since World War II, and is expected to exceed 100 percent of GDP before 2030.
Georgieva singled out advanced economies, especially the United States, as “the worst” in terms of debt burdens, as their debt-to-GDP ratios exceed the levels recorded in emerging markets and low-income countries.
She noted that policy makers can no longer rely on high growth rates alone to address financial problems.
She added: “However, we do not see decisive action in advanced economies with high debts, where there is an urgent need for reliable plans to control public finances in the medium term, supported in some cases by immediate financial measures, which contribute to alleviating some pressure on monetary policy.”
After five and a half years of inflation exceeding target levels, Georgieva said that inflationary pressures remain, driven by the expansion of artificial intelligence investments, energy and food price shocks, tariffs, increased defense spending, and rising debt servicing costs.
She continued: “Now may be an appropriate time to adopt a monetary approach that tends cautiously toward tightening in a number of countries,” adding that raising interest rates by the US Federal Reserve, the European Central Bank, and the Bank of Japan was “very appropriate.”
Increased risks of artificial intelligence
Georgieva highlighted other risks associated with artificial intelligence, noting that investment in it, as a proportion of GDP, is likely to exceed the levels of investment witnessed in the railways, electricity grids and communications infrastructure sectors.
She said that increasing economic and financial concentration is putting pressure on artificial intelligence companies to achieve gains in productivity and profits that justify their high valuations, warning that market disappointment could turn into a “broad shock.”
But she noted that IMF research shows that artificial intelligence, if properly developed and used, could add half a percentage point to global growth annually.
She said that preparing for artificial intelligence is a key factor, including establishing regulatory frameworks that “help manage the significant risks involved in artificial intelligence, including wide-ranging repercussions on the labor market, serious risks to cybersecurity and stability, as well as the possibility of advanced models escaping from human control and behaving uncontrollably.”
In addition to strengthening public finances, even with the difficult political costs this may entail, Georgieva said that governments must take other steps to support growth, including reforms to develop workforce skills, facilitate the creation and liquidation of companies, enhance energy security, and simplify systems and regulations.
Copper prices fell slightly (Wednesday) affected by the rise in the US dollar and the rise in oil prices, at a time when investors are awaiting the minutes of the US Federal Reserve meeting in search of indicators regarding the path of interest rates during the coming period.
The standard copper price for three-month delivery on the London Metal Exchange fell by 0.25 percent to reach $14,379 per metric ton by 03:00 GMT, according to Reuters.
The decline came in conjunction with an increase in the dollar index, which measures the performance of the US currency against a basket of major currencies, by 0.14 percent to 102.05 points. The rise of the dollar usually increases the cost of purchasing metals denominated in it for investors who hold other currencies, which puts pressure on demand and prices.
Copper has also come under additional pressure from higher oil prices. The rise in energy prices has led to growing fears of increased inflationary pressures, which may prompt central banks to tighten monetary policy and raise interest rates.
High interest rates typically negatively impact commodities linked to economic growth, such as copper, by slowing economic activity and reducing industrial demand.
Meanwhile, Asian stock markets fell, led by AI stocks, paring gains made earlier in the week, which had supported copper prices.
Despite the current pressures, the long-term outlook for demand for the red metal remains positive, as Standard & Poor's Global expects the expansion of the artificial intelligence and defense sectors to contribute to increasing demand for copper by about 50 percent by 2040.
Later Wednesday, investors are awaiting the release of the minutes of the Federal Reserve's September meeting, seeking to anticipate the possibilities of further increases in interest rates.
Aluminum continues to rise supported by supply concerns
On the other hand, aluminum was the most prominent gainer among industrial metals on the London Stock Exchange, as it rose by 0.25 percent, supported by supply risks associated with escalating tensions in the Middle East.
However, prices of the metal widely used in the construction, packaging and transportation sectors are still down by more than 17 percent compared to their highest level in four years, which they recorded last June, due to declining concerns about supplies, along with expectations of increased new production capacity in Indonesia.
As for the rest of the basic metals on the London Stock Exchange, zinc fell by 0.23 percent, lead by 0.13 percent, while nickel rose by 0.11 percent, and tin decreased by 0.09 percent.
The Shanghai Futures Exchange was closed due to a public holiday, and trading will resume on Thursday with the return of Chinese markets to work.
